Mention Nepal to most people and what usually comes to mind are images of dedicated Sherpas helping international climbers to reach the summit of Mount Everest or Theravada Buddhist monks tranquilly contemplating eternity in a mountain retreat.
But for all its seemingly serene aloofness and traditional Buddhist cultural conservation, Nepal boasts an up-and-coming and potentially promising economy.
In fact, despite being one of the least developed nations on Earth, with nearly a fourth of its population living below the poverty line on less than 50 cents per day, the so-called Roof of the World was rated in June as the third-fastest growing economy by the Swiss non-profit think tank World Economic Forum (WEF).
With a projected growth rate of 7.5 percent for 2017 — the highest in nearly a quarter century for the South Asian nation — Nepal in on track for a major financial rebound as a result of improved power supplies, reenergized and reformed agricultural production and higher spending on reconstruction following a series of devastating earthquakes in 2015 that killed more than 9,000 people and destroyed nearly a million homes, along with crucial infrastructure and highways.
Improved cross-border relations with India (which, as Nepal’s largest trade partner, accounts for $541 million of its total $909 million in exports and $3.81 billion of its $6.61 billion in imports) have also helped, leading to increased investment, as well as greater access to much-needed fuel.
By the same token, the political landscape in Nepal, which has been plagued by instability since the government abolished its 239-year-old monarchy in 2008, is less turbulent than it has been in the past (albeit far from stable), and there have been fewer labor strikes in the last couple years and significantly increased industrial production.
With the WEF blessing and a recent commitment from the Asian Infrastructure Investment Bank to help financial six massive government projects in highways and hydropower development (the country has an estimated 42,000 megawatts of commercially feasible capacity), Nepal could become the newly darling of foreign capital financiers.
But if Nepal hopes to bring in fresh foreign capital and transition into a middle-income country (its stated goal for the year 2030), it is going to have to attract private equity through a reduction in red-tape bureaucracy and direct incentives such as extended tax holidays and full repatriation of capital.
In order to compete with other Asian nations, Nepal will likewise have to establish a suitable institutional framework backed by welcoming local regulations which are currently sorely lacking in the landlocked nation.
And it is also going to have to clean up its act in the corruption department, implement political transparency and initiate comprehensive reforms to streamline business procedures to allow for sustainable economic growth that will create jobs, increase exports, lower the trade deficit and stop depending on remittances for 30 percent of the country’s GDP.
Nepal has been blessed this year by a good monsoon season (which translates into larger harvests), a steady supply of electricity (which keeps industrial output on track) and a better law-and-order environment (which is a key requisite for economic success).
Nepal’s agricultural sector — which accounts for nearly 30 percent of the economy — is expected to grow by more than 5 percent in 2017, as compared to the previous year, with rice production slated to surge by nearly 21 percent.
And the construction sector — which accounts for about 7 percent of the economy — is projected to grow by 11.7 percent.
Nepal’s budding manufacturing and commercial sectors are each headed for about 9.7 percent growth this year, and the real estate and education are expected to grow by about 5 percent each.
In other words, all the pieces for a major economic turnaround in Nepal are in now play.
Let up hope that the government in Katmandu can manage to keep the country on track and not blow this much-needed opportunity for the Nepalese people.
Thérèse Margolis can be reached at [email protected].